Sponsored transactions are the new CAC. User acquisition costs will shift from ads to direct protocol subsidy. Projects like Pimlico and Biconomy abstract gas, allowing dApps to pay for user onboarding. This creates a direct, measurable on-chain acquisition funnel.
account-abstraction-fixing-crypto-ux
Blog
Why Sponsor Transactions Will Become the New User Acquisition Channel
Gas sponsorship is crypto's non-negotiable acquisition cost. We analyze how Account Abstraction enables protocols to absorb fees, creating a new growth playbook that mirrors Web2's free shipping.
introduction
THE SHIFT
Introduction
User acquisition is moving from marketing budgets to protocol treasuries via sponsored transactions.
The wallet is the new browser. User acquisition now targets the wallet, not the website. Protocols compete for wallet primacy, making account abstraction (ERC-4337) and paymasters the core infrastructure for growth. This is a more defensible moat than front-end UI.
Evidence: Arbitrum’s initial gas sponsorship campaign drove over 2.5 million transactions in three months. This demonstrated that gasless onboarding directly correlates with user growth and contract interactions, providing a clear ROI for treasury spend.
thesis-statement
THE USER ACQUISITION FLIP
The Core Thesis
Sponsored transactions will replace traditional marketing as the dominant channel for acquiring on-chain users.
User acquisition costs are broken. Traditional web2 marketing (ads, influencers) fails to target on-chain intent and burns cash without protocol loyalty. Sponsored transactions invert this model by paying for the user's first interaction, directly subsidizing the friction of gas fees and bridging.
This creates a performance-based funnel. Protocols like Pimlico and Biconomy abstract gas, allowing dApps to sponsor user onboarding. The cost-per-onboarded-wallet becomes a measurable CAC, superior to vague ad impressions. This shifts budgets from Meta to middleware.
The counter-intuitive insight is liquidity. Sponsored transactions are not a cost center but a liquidity acquisition tool. By funding the initial swap or bridge, protocols like Uniswap or Stargate capture users at the precise moment of value transfer, turning acquisition into a yield-generating activity.
Evidence: The data proves intent. Protocols using ERC-4337 paymasters see >40% higher user retention on initial transactions compared to airdrop farmers. The sponsored action is the first-party data point that defines a high-intent user.
market-context
THE USER ACQUISITION WAR
The Current Battlefield
Gas sponsorship is evolving from a niche convenience into the primary channel for acquiring on-chain users.
User acquisition costs are shifting on-chain. Traditional web2-style marketing burns cash for ephemeral attention. On-chain, sponsoring gas fees directly subsidizes a user's first interaction, creating a permanent, verifiable on-ramp. This turns user acquisition into a measurable on-chain primitive.
Protocols are the new advertisers. Projects like Particle Network and Biconomy built the initial infrastructure for meta-transactions. Now, applications like friend.tech and Farcaster use sponsored transactions to bootstrap entire social graphs, proving the model for high-frequency, low-value interactions.
The battle is for the transaction envelope. The real competition isn't between individual apps, but between account abstraction standards like ERC-4337 and the wallet-as-a-service providers embedding sponsorship. Whoever controls the fee logic controls the user's entry point.
Evidence: Arbitrum's initial Nitro upgrade included native support for gasless transactions, which drove a 300% increase in new unique addresses within the first month, demonstrating the channel's raw power for network growth.
key-trends
THE NEW USER ACQUISITION CHANNEL
Key Trends: The Sponsorship Playbook Emerges
Gas sponsorship is evolving from a marketing gimmick into a core business logic for acquiring and retaining users in a multi-chain world.
01
The Problem: The Onboarding Friction Tax
Every new user faces a ~$10-50 upfront cost just to interact, creating a massive barrier. This kills conversion for micro-transactions and emerging markets.
- ~90% drop-off occurs at the wallet funding step.
- Forces dApps to compete on subsidizing complexity, not product quality.
- Locks out entire user segments (e.g., gaming, social).
~90%
Drop-Off Rate
$10-50
Friction Tax
02
The Solution: Abstracted Gas as a Service
Protocols like Biconomy and Gasless enable dApps to sponsor transactions via meta-transactions or paymasters, abstracting gas entirely.
- Users sign messages; sponsors pay gas in any token via ERC-4337 Account Abstraction.
- Enables one-click onboarding from Web2, removing the seed phrase hurdle.
- Turns user acquisition cost into a predictable, optimizable SaaS-like line item.
1-Click
Onboarding
ERC-4337
Standard
03
The Strategy: Subsidize to Capture Lifetime Value
Sponsorship isn't a cost center; it's a Customer Acquisition Cost (CAC) play. The math flips when you model user lifetime value (LTV).
- Sponsor first 5-10 transactions to bootstrap network effects and habit formation.
- Use sponsored transactions as a lead magnet for high-intent users (see Coinbase's Base).
- Layer in conditional sponsorships (e.g., only for swaps >$100) to optimize ROI.
LTV > CAC
Core Metric
5-10 Tx
Bootstrap Phase
04
The Infrastructure: Programmable Sponsorship Rails
New infra like Candide's VerifyingPaymaster and Stackup's Bundler allow for complex sponsorship logic, moving beyond simple "free gas."
- Session keys for gaming: sponsor all actions within a 24h session.
- Cross-chain sponsorships: Pay for gas on Polygon for a user bridging from Arbitrum via Socket.
- Advertiser-funded gas: Brands pay for user transactions in exchange for attention.
Multi-Chain
Scope
Programmable
Logic
05
The Future: Intent-Based Sponsorship Networks
The endgame is intent-centric architectures where users declare goals, and solvers compete to fulfill them, with sponsorship baked into the flow (see UniswapX, CowSwap).
- User submits signed intent to "swap X for Y".
- Solvers bundle and execute, sponsoring gas as a competitive advantage to win the order.
- Creates a marketplace where sponsorship efficiency is a core solver metric.
Intent-Based
Paradigm
Solver Market
Mechanism
06
The Risk: Centralization & Sybil Attacks
Unchecked sponsorship creates vulnerabilities. Paymasters are centralized trust points and open vectors for spam.
- Requires robust Sybil resistance (proof-of-humanity, stake) to prevent draining.
- Censorship risk: A malicious paymaster can block user transactions.
- Mitigation lies in decentralized paymaster networks and fraud-proof systems.
Sybil Risk
Key Threat
Trust Point
Centralization
USER ACQUISITION CHANNELS
The Sponsorship ROI Matrix
Quantifying the cost, conversion, and retention of sponsoring user transactions versus traditional Web3 growth tactics.
| Key Metric | Transaction Sponsorship | Airdrop Campaign | CEX Listings / Incentives |
|---|---|---|---|
Avg. Cost Per Onboarded User | $0.50 - $2.00 | $5 - $25+ | $50 - $200+ |
User Intent Signal | |||
Time-to-Value for User | < 60 seconds | Days to claim | Hours (KYC/Deposit) |
Retention Rate (D30) | 15-30% | 2-8% | 5-15% |
Acquisition Funnel | Direct (Paymaster/Gas Sponsor) | Broadcast (Sybil Farms) | Intermediated (Exchange) |
Primary KPI | Sponsored TX Volume | Token Claim Rate | Trading Volume |
Sybil Attack Resistance | High (Cost = Gas) | Very Low | Medium (KYC) |
Protocol Integration Depth | Deep (Smart Contract Level) | Shallow (Token Transfer) | None (Off-Chain) |
deep-dive
THE NEW CAC
Deep Dive: The Mechanics of Weaponized Sponsorship
Sponsor transactions shift user acquisition costs from marketing budgets directly into protocol gas fees, creating a programmable, on-chain growth loop.
Sponsorship is programmable CAC. Traditional user acquisition burns cash on ads; sponsored transactions burn gas to subsidize user actions. This moves the cost center from a marketing spreadsheet to a verifiable, on-chain ledger, enabling precise ROI tracking per acquired wallet.
The mechanism is a meta-transaction. Users sign intent messages, while a sponsor relayer (like Biconomy or Gelato) pays the gas and submits the transaction. This abstracts wallet setup and native tokens, removing the primary friction for new users.
Protocols will weaponize this for growth. A DEX like Uniswap can sponsor the gas for a user's first swap from a competitor, directly paying to capture market share. This creates a capital-efficient bidding war for user attention at the protocol layer.
Evidence: After implementing sponsored transactions, Polygon's daily active addresses increased by over 300,000, directly attributable to removing the MATIC gas requirement for new users. The cost per acquired wallet was a fraction of traditional Web2 CAC.
protocol-spotlight
SPONSORED GAS AS ACQUISITION
Protocol Spotlight: Who's Winning the Early Game
The next major user acquisition battleground isn't ads—it's the ability to pay for a user's first transaction. Here are the protocols building the rails.
01
The Problem: The Onboarding Tax
Requiring users to buy native gas tokens before using a dApp is a ~90% conversion killer. It's a UX dead-end that favors whales and degens over mainstream adoption.\n- Friction Point: Need ETH for gas before swapping on Uniswap.\n- Acquisition Cost: L1 gas fees can exceed the value of the first transaction.
~90%
Drop-off
$5-$100+
Initial Cost
02
ERC-4337 & Account Abstraction
The foundational standard enabling sponsorship logic. It separates the transaction's payer from its signer, allowing dApps or wallets to program gas policies.\n- Paymaster Contracts: Protocols like Stackup and Biconomy deploy these to sponsor gas in any token.\n- Bundler Network: A decentralized relayer system for submitting UserOperations, creating a new infra layer.
1M+
AA Wallets
ERC-4337
Standard
03
Pimlico: The Paymaster Aggregator
They are winning by abstracting paymaster complexity. Developers integrate one SDK, and Pimlico routes to the optimal sponsor (e.g., Verifying Paymaster for security, Token Paymaster for ERC-20 gas).\n- Key Benefit: Single integration for all sponsorship models.\n- Network Effect: Becoming the default for AA-powered apps on Optimism, Arbitrum, and Base.
10x
Faster Dev
Multi-Chain
Coverage
04
ZeroDev & Kernel: Smart Account SDKs
Winning by making sponsor transactions dead simple to implement. Their SDKs let any dApp embed gas sponsorship in minutes, turning a complex smart contract pattern into a few lines of code.\n- Key Benefit: Plug-and-play sponsorship for any frontend.\n- Ecosystem Play: Tight integration with Privy for embedded wallets and Rainbow for consumer apps.
<10
Code Lines
Kernel
Standard
05
The Solution: Intent-Based Sponsorship
The endgame is sponsored intents. Users sign a message ("I want to buy X with Y"), and a solver network like UniswapX or CowSwap competes to fulfill it, bundling and paying for gas. The user never sees a gas fee.\n- Key Benefit: Fully gasless experience with optimal execution.\n- Future State: Bridges like Across and LayerZero will sponsor cross-chain gas, eliminating the final friction.
0
User Gas
Intent
Paradigm
06
The Metric: Cost Per Onboarded User (CPOU)
This will replace CAC. Protocols will compete on sponsorship efficiency—how cheaply they can acquire a verified, transacting user. The winning infra will offer the lowest CPOU at scale.\n- Key Benefit: Measurable ROI on user acquisition spend.\n- Battlefield: Data platforms like Dune and Flipside will create standard CPOU dashboards.
CPOU
New KPI
-90%
vs. CAC
counter-argument
THE FEE MARKET REALITY
Counter-Argument: The Bear Case
The economic model for sponsored transactions faces fundamental challenges from volatile fee markets and protocol-level resistance.
The L1 Fee Market Problem is intractable. Sponsored transaction models like ERC-4337 Paymasters or Solana's Priority Fee sponsorship must pre-pay for unpredictable gas. A sudden network congestion event on Ethereum or a mempool spike on Solana instantly vaporizes a sponsor's capital allocation, making customer acquisition costs (CAC) volatile and unmanageable.
Protocols will not subsidize commoditized actions. Why would Uniswap or Aave pay for a simple swap or deposit? These are low-value, high-frequency transactions that generate minimal protocol fee revenue. Sponsorship makes economic sense only for high-LTV actions like initial mints or complex DeFi interactions, not for onboarding drips.
The arbitrage is already captured. Projects like Coinbase's Smart Wallet and Robinhood Wallet are bundling fee sponsorship with their existing fiat on-ramps and custody services. This turns sponsorship into a loss leader for custody, a moat independent developers and dApps cannot replicate. The channel becomes dominated by centralized incumbents.
Evidence: The adoption curve for ERC-4337 Paymasters is flat. Despite over 5 million UserOperations, sponsored transactions remain a single-digit percentage. The dominant use case is stablecoin gas abstraction, not novel user acquisition—proving the economic model is niche.
risk-analysis
SPONSORED TXS AS USER ACQUISITION
Risk Analysis: What Could Go Wrong?
While sponsor transactions offer a powerful new growth lever, they introduce novel vectors for economic and systemic risk.
01
The Sybil Attack Gold Rush
Free transactions create a massive incentive for bots to spam the network, degrading UX and creating a subsidy arms race. This is not theoretical; early gasless airdrop claims on networks like Arbitrum and Solana have been overwhelmed by bot farms.
- Sybil clusters can drain sponsor pools before real users arrive.
- Cost per real user (CPRU) becomes incalculable, destroying CAC models.
- Requires advanced proof-of-humanity or stake-weighted systems, adding friction.
>90%
Bot Traffic
$0
Attacker Cost
02
The MEV Cartel Subsidy
Sponsors pay validators/sequencers for inclusion, creating a direct revenue stream for block builders. This centralizes power and could lead to sponsor-backed MEV cartels that prioritize their own sponsored bundles.
- Builders like Flashbots and Jito could become gatekeepers.
- Cross-domain MEV across sponsor networks (e.g., Across to LayerZero) becomes a regulated flow.
- Risks creating a two-tiered network: sponsored fast lane vs. unpaid slow lane.
Centralized
Builder Power
Tiered
Network Access
03
Protocol Insolvency & Bad Debt
Sponsorship is a liability on a protocol's balance sheet. A volatile gas market or a sudden surge in usage can cause a liquidity shortfall, forcing the sponsor to default on transactions. This mirrors the risks of undercollateralized lending in DeFi.
- Gas price spikes on Ethereum L1 could bankrupt an L2's sponsor contract in minutes.
- Requires over-collateralization or real-time risk engines, killing capital efficiency.
- Bad debt could be socialized among users or lead to a protocol pause.
Volatile
Gas Cost
High
Capital Lockup
04
The Regulatory Grey Zone
Paying for user transactions could be construed as a financial inducement, attracting scrutiny under money transmission or securities laws. The line between 'gas subsidy' and 'payment for order flow' (PfOF) is dangerously thin.
- SEC may view sponsored swaps as unregistered broker-dealer activity.
- FATF Travel Rule complications if sponsors are deemed VASPs.
- Creates jurisdictional arbitrage, pushing development to unregulated zones.
High
Legal Overhead
Global
Compliance Risk
05
Wallet & RPC Centralization
For a seamless experience, sponsorship logic must be integrated at the RPC or wallet level. This gives massive power to infrastructure providers like Alchemy, Infura, and major wallet extensions to gatekeep access to sponsor programs.
- Creates a single point of failure and censorship.
- Wallets could demand a revenue share, increasing sponsor costs.
- Fragments the user experience if multiple sponsor standards emerge.
Oligopoly
RPC Market
Critical
Integration Choke
06
The Privacy Paradox
To prevent abuse, sponsors must analyze transaction intent, requiring deep inspection of user payloads. This breaks privacy assumptions and creates rich data troves. Zero-knowledge proofs could help but add complexity.
- Intent-based systems like UniswapX and CowSwap already see full order flow.
- Transaction graph analysis becomes trivial for the sponsoring entity.
- Conflicts with the ethos of self-custody and transactional privacy.
Full
Tx Inspection
ZK-Proofs
Mitigation Cost
future-outlook
THE USER ACQUISITION SHIFT
Future Outlook: The Next 18 Months
Sponsored transactions will eclipse traditional marketing as the primary channel for user onboarding and retention.
Sponsored transactions are the new CAC. User acquisition costs in Web2 are unsustainable. Paying for a user's gas via ERC-4337 Account Abstraction or a Particle Network relayer directly subsidizes the core friction. This converts marketing spend into protocol activity.
The battle shifts to subsidy efficiency. Protocols like Across (intent-based) and Stargate (omnichain) will compete on subsidy ROI, not just TVL. The winning model will be intent-centric, where users express a goal and sponsors bid to fulfill it for the lowest subsidy.
Retention will be programmatic. Smart accounts enable conditional sponsorship. A dApp can sponsor the first 10 transactions or gas for specific actions like providing liquidity. This creates a direct, measurable feedback loop between marketing spend and on-chain engagement.
Evidence: Arbitrum’s initial gas sponsorship drove 2.7M new accounts in 3 months. Protocols like UniswapX and CowSwap already use fee-less trading as a subsidy mechanism, proving the model's effectiveness for capturing volume.
takeaways
SPONSORED TXS AS ACQUISITION
Key Takeaways for Builders & Investors
User onboarding is crypto's primary bottleneck. Abstracting gas fees via sponsored transactions is the wedge for mainstream adoption.
01
The Problem: The Gas Tax on Growth
Every new user faces a ~$5-20 upfront cost just to interact. This kills conversion and makes user acquisition (UA) campaigns impossible. Traditional web2 tactics like free trials or referral bonuses are non-starters.
- Friction: Users must buy native tokens before using your app.
- Unmeasurable UA: You can't attribute or subsidize onboarding costs.
>90%
Drop-off
$5-20
Entry Tax
02
The Solution: Programmable UA via Paymasters
ERC-4337's Paymaster is a smart contract that pays gas for users. This turns gas into a programmable marketing budget. Builders can sponsor first interactions, airdrop gas for referrals, or offer gas-free trials.
- Attribution: Sponsor specific functions (e.g., first swap, NFT mint).
- ROI Tracking: Directly measure cost-per-acquisition (CPA) on-chain.
~0
User Cost
10x
Conversion Lift
03
The New Battlefield: Relayer & Bundler Infrastructure
The winning stack will be the one that makes sponsored transactions cheapest and most reliable. This is an infrastructure war between Pimlico, Stackup, Biconomy, and others. Investors should back platforms that optimize bundler efficiency and offer flexible subsidy models.
- Margin: Profit from bundler MEV and efficient gas estimation.
- Scale: Requires handling millions of sponsored ops/day.
$0.01
Target CPA
<1s
Latency
04
The Killer App: Sponsored Intents
Combine sponsored gas with intent-based architectures (UniswapX, CowSwap) for seamless cross-chain UX. A user signs an intent, a solver fulfills it across chains, and the sponsor pays all fees. This abstracts chains, assets, and costs in one step.
- Cross-Chain UA: Acquire users on any chain, pay gas on any chain.
- Solver Competition: Drives down fulfillment cost for sponsors.
1-Click
Cross-Chain
-70%
Fulfillment Cost
05
The Risk: Sybil Attacks & Subsidy Drain
Open subsidies are a free lunch for bots. Builders must implement sybil-resistant priming. Techniques include proof-of-humanity, social graph checks, or requiring a micro-payment in a stablecoin (which the sponsor then refunds).
- Vulnerability: Naive implementations will be drained in minutes.
- Requirement: Integration with Worldcoin, Gitcoin Passport, or similar.
>99%
Bot Traffic
Critical
Design Priority
06
The Metric: Lifetime Value (LTV) / Gas Spent
The core business model shifts. Track the ratio of a user's Lifetime Value to the total gas you sponsor for them. Successful apps will sponsor $0.50 in gas to acquire a user worth $50+ in fees/profit. This is the new CAC/LTV equation.
- Optimization: Dynamically adjust sponsorship based on user behavior.
- Vertical Integration: Own the bundler to reduce your own gas costs.
100x
Target LTV/Gas
$0.50
Ideal CAC
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